DCIT, Central Circle - 2(1), Kolkata, Kolkata V. M/s. SRA Properties Pvt. Ltd., , Kolkata

ITSSA 135/KOL/2017

• Counselvise Citation: [2019] 117 COUNSELVISE.COM (IT) 5611 (ITAT-KOLKATA)
• Duration Of Justice: 1 year(s) 7 month(s) 8 day(s)
• Appeal Type: Income Tax (Search & Seizure) Appeal
• Pronouncement Date: 17-05-2019
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Assessment Year: 2011-2012
• Appeal Filed On: 09-10-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Bogus Share capital; Unexplained investment
• Section: 143(3); 153A; 14A

Judgement Text

, B , IN THE INCOME TAX APPELLATE TRIBUNAL KOLKATA BENCH B KOLKATA BEFORE SHRI S.S.GODARA, JUDICIAL MEMBER AND DR. A.L. SAINI, ACCOUNTANT MEMBER IT (SS) A NO. 141/KOL / 2017 & C.O. NO.11/KOL/2019 (A/O IT(SS)A NO.141/KOL/2017) ASSESSMENT YEAR :2012-13 DCIT, CENTRAL CIRCLE- 2(1), 3 RD FLOOR, AAYAKAR BHAWAN, POORVA E.M. BYE PASS, 110, SHANTI PALLY, KOLKATA-107 V/S . M/S BHAVYA MERCHANDISE PVT. LTD., P-128, BLOCK-B, LAKE TOWN, KOLKATA-89 [ PAN NO.AADCB 6137 F ] /APPELLANT .. / RESPONDENT/ /CO-OBJECTOR IT (SS) A NO. 1 40/KOL / 2017 & C.O. NO.10/KOL/2018 (A/O IT(SS)A NO.140/KOL/2017) ASSESSMENT YEAR: 2012-13 DCIT, CENTRAL CIRCLE- 2(1), 3 RD FLOOR, AAYAKAR BHAWAN, POORVA E.M. BYE PASS, 110, SHANTI PALLY, KOLKATA-107 V/S . M/S SRA MERCHANDISE PVT. LTD., 5A, SPACE TOWN HOUSING COMPLEX, VIP ROAD, BLOCK-1, KOLKATA-52 [ PAN NO.AAMCS 5239 C ] /APPELLANT .. / RESPONDENT/ /CO-OBJECTOR IT (SS) A NO. 135 - 137 / KOL / 2017 & C.O. NO.4-6/KOL/2018, (A/O IT(SS)A NO.135-137/KOL/2017) ASSESSMENT YEARS :2011-12, 2013- 14 & 2014-15 DCIT, CENTRAL CIRCLE- 2(1), 3 RD FLOOR, AAYAKAR BHAWAN, POORVA E.M. V/S . M/S SRA PROPERTIES PVT. LTD., 5A, SPACE TOWN HOUSING COMPLEX, VIP IT(SS)A NO.135-137 & 140-141/K/17 CO 4-6 & 10/KOL/1 8 & 11/K/11 DCIT CC-2(1) KOL. VS. M/S SRA PROPERTIES/MERCHAN DIES & BHAVYA MERCHANDISE P LTD PAGE 2 BYE PASS, 110, SHANTI PALLY, KOLKATA-107 ROAD, BLOCK-1, KOLKATA-52 [ PAN NO.AADCS 7377 M ] /APPELLANT .. / RESPONDENT/ /CO-OBJECTOR /BY ASSESSEE SHRI R.P. AGARWAL, SENIOR ADVOCATE & SHRI NIRAV SHETH, FCA /BY RESPONDENT SHRI A.K. SINGH, CIT-DR /DATE OF HEARING 01-05-2019 /DATE OF PRONOUNCEMENT -05-2019 / O R D E R PER BENCH:- THE INSTANT BATCH OF TEN CASES PERTAINS TO THREE AS SESSEES M/S BHAVYA MERCHANDISE PVT. LTD., M/S SRA MERCHANDISE PVT. LTD . & M/S SRA PROPERTIES PVT. LTD. HEREINAFTER REFERRED IS FIRST, SECOND AND THIRD ASSESSEES; RESPECTIVELY. THE REVENUES APPEAL IT(SS) 141/KOL/2017 ALONGWITH THIRD ASSESSEES CROSS OBJECTION NO. 11/KOL/2019 ARISE AGAINST THE COMMISS IONER OF INCOME TAX (APPEALS)-20 KOLKATAS ORDER DATED 14.07.2017 PASSE D IN CASE NO.11627/CIT(A)-20/CC-2(1)/16-17. THE REVENUES APP EAL IT(SS)A NO.140/KOL/2017 AND SECOND ASSESSEES CROSS OBJECTI ON THEREIN NO.10/KOL/2018 ARE DIRECTED AGAINST THE VERY CIT(A) S ORDER DATED.18.07.2017 PASSED IN CASE NO.11573/CIT(A)-20/CC-2(1)/16-17. TH E REVENUES NEXT THREE APPEAL(S) IT(SS)A NO.135-137/KOL/2017 AND ASSESSEE S CROSS OBJECTIONS NOS.4-6/KOL/2018 THERETO EMANATE FROM THIS VERY CIT (A)S ORDER(S); ALL DATED 18.07.2017 PASSED IN CASE NO.11600, 11579 & 11584/C IT(A)-20/CC-2(1); RESPECTIVELY. RELEVANT PROCEEDINGS IN ALL CASES ARE U/S 153A R.W.S 143(3) OF THE INCOME TAX ACT, 1961; IN SHORT THE ACT. HEARD ALL ASSESSEES AS WELL AS THE REVENUE. 2. IT TRANSPIRES DURING THE COURSE OF HEARING THAT THE RELEVANT FACTS INVOLVED IN FIRST TWO ASSESSEES FOUR CASES (SUPRA) ARE IDEN TICAL. THE REVENUE HAS CHALLENGED CORRECTNESS OF CIT(A)S IDENTICAL ORDER( S) QUASHING THE IMPUGNED IT(SS)A NO.135-137 & 140-141/K/17 CO 4-6 & 10/KOL/1 8 & 11/K/11 DCIT CC-2(1) KOL. VS. M/S SRA PROPERTIES/MERCHAN DIES & BHAVYA MERCHANDISE P LTD PAGE 3 ASSESSMENTS / PROCEEDINGS ON THE GROUND THAT THE SE ARCH IN ISSUE DATED 05.08.2014 HAD NOT YIELDED ANY INCRIMINATING MATERI AL SO AS TO GIVE RISE TO THE PROCEEDINGS IN ISSUE. IT THEN AVERS THAT THE CIT(A) HAS ERRED IN LAW AS WELL AS ON FACTS IN DECLARING THE CORRESPONDING REGULAR ASS ESSMENTS TO HAVE ALREADY BECOME FINAL WHEREAS SAME HAD NOT ABATED AS O THE D ATE OF SEARCH AND THEREFORE, THE ASSESSING OFFICER HAD RIGHTLY TAKEN RECOURSE TO IMPUGNED SEC. 153A PROCEEDINGS. THE REVENUES LAST PLEA IS ON MER ITS THAT THE ASSESSING OFFICERS ASSESSMENT IN ISSUE HAD RIGHTLY ADDED UNE XPLAINED CASH CREDITS IN THE NATURE OF SHARE CAPITAL / PREMIUM, UNEXPLAINED INVESTMENTS FOLLOWED BY U/S 14A R.W.S. 8D DISALLOWANCE INVOLVING VARYING SU MS. LEARNED CIT-DR SUBMITS DURING THE COURSE OF HEARING THAT CIT(A)S FINDINGS QUASHING THE IMPUGNED ASSESSMENTS / PROCEEDINGS ON THESE LEGAL I SSUES ARE NOT SUSTAINABLE AS THE IMPUGNED SEARCH HAD INDEED YIELD ED THE ASSESSEES UNDISCLOSED INCOME WHICH SAW LIGHT OF THE DAY AS PE R THEIR AUTHORIZED PERSONS DECLARATION(S) MADE. HE FURTHER EMPHASIS THE POINT THAT THE REGULAR ASSESSMENT(S) IN ISSUE HAD ALSO NOT ABATED AS ON TH E DATE OF SEARCH. 3. LEARNED SENIOR COUNSEL REPRESENTS ALL THESE ASSE SSEES IN THE INSTANT BATCH OF CASES. HE RISES TO HIS SENIORITY TO FAIRLY STATE AT THE BAR THAT THIS CIT(A)S FINDING ON THE FOREGOING LEGAL ISSUES ARE NOT SUSTAINABLE SINCE THE SEARCH IN ISSUE LED TO INCRIMINATING MATERIAL AND A SSESSMENTS IN ISSUE HAD ALSO NOT ABATED. HIS ONLY PRAYER IS THAT THE ASSESS EES CORRESPONDING CROSS- OBJECTIONS IN THESE TWO REVENUES APPEAL(S) SEEK TO DEAL WITH ALL THE IMPUGNED ADDITION(S) ON MERITS AND THEREFORE, THE I NSTANT LIS INCLUDING REVENUES APPEAL(S) AND CORRESPONDING CROSS OBJECTI ONS BE RESTORED TO ASSESSING OFFICER FOR AFRESH DETAILED ADJUDICATION AND VERIFIED OF ASSESSEES SHARE APPLICATION / PREMIUM ON THE ISSUES OF GENUIN ENESS ON CREDITWORTHINESS. OUR ATTENTION IS FURTHER INVITED TO THE CIT(A)S FI NDINGS IN BOTH CASES NOT ADJUDICATING THE THREE ISSUES (SUPRA) ON MERITS AS HE HAS ACCEPTED TO ASSESSEES LEGAL PLEA. LEARNED CIT-DR IS FAIR ENOUG H IN NOT DISPUTING THE ASSESSEES PRAYER ON MERITS. WE ACCORDINGLY CONCLUD E IN THESE FIRST FOUR CASES IT(SS)A NO.135-137 & 140-141/K/17 CO 4-6 & 10/KOL/1 8 & 11/K/11 DCIT CC-2(1) KOL. VS. M/S SRA PROPERTIES/MERCHAN DIES & BHAVYA MERCHANDISE P LTD PAGE 4 THAT THESE THREE IDENTICAL ISSUES OF SHARE APPLICAT ION MONEY, UNEXPLAINED INVESTMENT AND SEC. 14A R.W.S. 8D DISALLOWANCE / AD DITION NEED TO RE- EXAMINED BY THE ASSESSING OFFICER AS PER LAW AFTER AFFORDING ADEQUATE OPPORTUNITY OF HEARING TO THE TAXPAYER. WE ORDER AC CORDINGLY. WE ACCEPT THE REVENUES THE TWO APPEAL(S) IT(SS)A NO.141 AND 140/ KOL/2017 AS WELL AS THE ASSESSEES CROSS OBJECTIONS 11/KOL/2019 AND 10/KOL/2 018 FOR STATISTICAL PURPOSES. 4. NEXT COME THE THIRD ASSESSEES SIX CASES INVOLVI NG REVENUES THREE APPEAL(S) IT(SS)A NO.135-137/KOL/2017 AND CROSS OBJ ECTION(S) NO.04- 06/KOL/2018. THE REVENUES PLEADINGS IN THIS THREE APPEAL(S) ARE ALSO IDENTICAL IN NATURE AS IN FOREGOING CASES SEEKING T O REVERSE THE CIT(A)S FINDINGS QUASHING THE IMPUGNED ASSESSMENT / PROCEED INGS ON TWIN REASONING (SUPRA). THE ASSESSEES CROSS OBJECTIONS WITH IDENT ICAL ISSUES OF UNEXPLAINED SHARE CAPITAL / PREMIUM UNEXPLAINED INVESTMENT AND SEC. 14A R.W.S. 8D DISALLOWANCE ON MERITS ALIKE IN EARLIER CASES. 5. IT EMERGES THAT THE ASSESSEE HAS ALSO FILED ITS ADDITIONAL GROUND IN ITS CROSS-OBJECTIONS IN ALL REVENUES THREE APPEAL(S) S EEKING TO QUASH THE IMPUGNED PROCEEDINGS ON THE GROUND THAT IT HAD CONV ERTED ITSELF FROM A CORPORATE ENTITY TO A LIMITED LIABILITY PARTNERSHIP LLP IN THE NAME AND STYLE OF M/S SRA PROPERTIES PVT. LLP ON 17.03.2015 WHEREA S THE ASSESSING OFFICER HAD INITIATED SEC. 153A PROCEEDINGS ON 17.07.2015. MR. AGARWAL VEHEMENTLY PLEADS THEREFORE THAT THE DEPARTMENT HAD FRAMED THE IMPUGNED ASSESSMENT IN NON-EST ENTITES CASES. 6. LEARNED CIT-DR STRONGLY CONTENDS ON THE OTHER HA ND THAT THE ASSESSEES INSTANT ADDITIONAL SUBSTANTIVE GROUND IN ITS CROSS OBJECTIONS DOES NOT DESERVE TO BE ADMITTED AT THIS BELATED STAGE SI NCE IT HAD NOT MADE THE NECESSARY AVERMENTS IN EITHER OF THE LOWER PROCEEDI NGS. WE FIND NO MERIT IN REVENUES INSTANT TECHNICAL ARGUMENT. THIS TRIBUNAL S SPECIAL BENCH DECISION IN ALL CARGO GLOBAL LOGISTIC LTD. VS. DCIT (2012) 1 37 ITD 24 (MUM) (SB) TAKE IT(SS)A NO.135-137 & 140-141/K/17 CO 4-6 & 10/KOL/1 8 & 11/K/11 DCIT CC-2(1) KOL. VS. M/S SRA PROPERTIES/MERCHAN DIES & BHAVYA MERCHANDISE P LTD PAGE 5 INTO CONSIDERATION HON'BLE APEX COURTS LANDMARK JU DGMENT IN NTPC CASE 229 ITR 383 (SC) TO CONCLUDE THAT WE CAN VERY WELL ENTERTAIN A PURE LEGAL QUESTION IN ORDER TO ASCERTAIN CORRECT TAX LIABILIT Y OF AN ASSESSEE IN CASE ALL THE RELEVANT FACTS FORM PART OF THE RECORDS. WE MAKE IT CLEAR THAT THE REVENUE IS VERY FAIR IN NOT DISPUTING THE CLINCHING FACT OF AS SESSEES CONVERSION TO AN LLP ON 17.03.2015 I.E. VERY WELL BEFORE THE INITIATIO N OF SEC. 153A PROCEEDINGS ON 27.07.2015. NOW COMING TO THE QUESTI ON AS TO WHETHER SUCH AN ASSESSMENT / PROCEEDING IN CASE OF A NON-ES T ENTITYS HOLD AS THE FOLLOWING CASE LAW MAKE IT CLEAR THAT SUCH ASSESSME NTS ARE NOT SUSTAINABLE IN THE EYES OF LAW. A) M/S PAWANSUT MANAGEMENT LTD. VS. ITO ITA NO.1524 /KOL/2016 DECIDED ON 14.02.2018; B)M/S COMPUTER ENGINEERING SERVICES INDIA (P) LTD. VS. ACIT ITA NOS. 5874-5878/DEL/2013 DECIDED ON 29.05.2015 C) CIT VS. INTEL TECHNOLOGY INDIA (P) LTD. 380 ITR 272 (SC) D) RAZA TEXTILE LTD. VS. ITO 87 ITR 539 (SC) E) SARASWATI INDUSTRIAL SYNDICATE LTD. VS. CIT CIVI L APPEAL NO. 91 OF 1976 (1990) 53 TAXMANN. 92(SC) F) PAMPASAR DISTILLRY LTD. VS. ACIT, ITA NO.304, 55 8-560 & 1972- 1676/KOL2005 G) DCIT & ANR. VS. MANI SQUARE LTD. &ANR. 190 TTJ 7 42 (KOL) H) CIT VS. ADINARAYANA MURTY 65 ITR 607 SC) I) ITO VS. PURBANCHAL POWER CO.LTD. ITA NO. 201/KOL /2010 DECIDED ON 17.07.2014 J) B.K. AGENCIES VS. ITO ITGA 255-2552/KOL/2013 DEC IDED ON 31.01.2017 K) CIT VS. INTEL TECHNOLOGY INDIA (P) LTD. (2015) 5 7 TAXMANN.COM 159(KAR) L) SPICE INFOTAINMENT LTD. VS. CIT 247 CTR 500 (DEL ) K) CIT VS. SPICE INFOTAINMENT LTD. APPEAL NO.285 OF 2014 (SC) IT(SS)A NO.135-137 & 140-141/K/17 CO 4-6 & 10/KOL/1 8 & 11/K/11 DCIT CC-2(1) KOL. VS. M/S SRA PROPERTIES/MERCHAN DIES & BHAVYA MERCHANDISE P LTD PAGE 6 WE ACCORDINGLY DRAW SUPPORT FROM THE ABOVE REFERRED JUDICIAL PRECEDENTS TO CONCLUDE THAT IMPUGNED ASSESSMENT / PROCEEDINGS ARE NOT SUSTAINABLE SINCE FRAMED IN CASE OF A NON-EST ENTITY. MR AGARWAL QUOT ES SEC. 170 OF THE ACT AT THIS STAGE TO MAKE IT CLEAR THAT IT IS VERY WELL OP EN FOR THE ASSESSING OFFICER TO PROCEED AGAINST THE SUCCESSOR ENTITY. WE THEREFORE MAKE IT CLEAR BEFORE PARTING THAT IT SHALL BE VERY WELL OPEN FOR THE ASS ESSING OFFICER TO PROCEED AGAINST THE SUCCESSOR LLP (SUPRA) AS PER LAW. THE R EVENUES LAST THREE APPEAL(S) IT(SS)A NO. 135-137/KOL/2017 ARE DISMISSE D AND ASSESSEES CROSS OBJECTION(S) ARE ALLOWED IN ABOVE TERMS. 7. THE REVENUES FORMER TWO APPEAL(S) IT(SS)A NO.14 1 AND 140/KOL/2017 AND TWO ASSESSEES CROSS OBJECTION(S) NO.11/KOL/201 9 AND 10/KOL/2018 ARE ALLOWED FOR STATISTICAL PURPOSES. THE REVENUES LAS T THREE APPEAL(S) IT(SS)A NO.135-137/KOL/2017 IN CASE OF THE THIRD ASSESSEE A RE DISMISSED AND TAXPAYERS CROSS OBJECTIONS NO.04-06/KOL/2018 ARE A LLOWED IN ABOVE TERMS. ORDERED ACCORDINGLY. ORDER PRONOUNCED IN THE OPEN COURT 1 7/05/2019 SD/- SD/- ( ) () ) (DR.A.L. SAINI) (S.S.GODARA) (ACCOUNTANT MEMBER) (JUDICIAL MEMBER) KOLKATA, *DKP, SR.P.S *- 17 / 05 /201 9 / COPY OF ORDER FORWARDED TO:- 1. /ASSESSEE-M/S SRA PROPERTIES PVT. LTD./SRA MERCHAND ISE PVT. LTD. 5A, SPACE TOWN HOUSING COMPLE X, VIP ROAD, BLOCK-1, KOLKATA-52/M/S BHAVYA MERCHANDISE PVT LTD . P-128, BLOCK-B, LAKE TOWN KOLKAT-89 2. /REVENUE-DCIT, CENTRAL CIRCLE-2(1), 3 RD FLOOR, AAYAKAR BHAWAN, POORVA E.M.BYE PASS, 110, SHANTI PALL Y, KOLKATKA-107 3. 5 6 / CONCERNED CIT KOLKATA 4. 6- / CIT (A) KOLKATA 5. 9 ))5, 5, / DR, ITAT, KOLKATA 6. > / GUARD FILE. BY ORDER/ , 5,